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Gay Market Power

On June 22, 1969, the Stonewall Riots in New York City marked
the start of the gay rights movement in America. Three decades
later, gay men and lesbians have emerged as a potent consumer
segment. Financial services, one of the hottest categories in this
market, is playing a prominent role in developing the Web as a
gay-friendly media.

Gay.com-a news, culture, and chat site-now draws 1 million sets
of eyeballs a month. In May, as American Demographics went to
press, gay.com was about to announce a deal with two Fortune 500
companies to provide financial services online. And in April,
gfn.com, the Gay Financial Network, became the first gay Web site
to offer its members the opportunity to sign up for annuities and
mortgages online.

Why go online to reach gays? One reason is that media vehicles
for targeting this audience are limited in both size and scope. And
TV is too inefficient to make a buy worthwhile, according to Howard
Buford, chief executive officer and president of Prime Access, an
ad agency specializing in the black, Latino, and gay markets.
There's also the resistance of networks to contend with: ABC, for
example, rejected a commercial for a lesbian cruise company slated
to air during the Ellen coming-out episode in April 1997.

Besides TV, there's print, which has been the primary media for
reaching the national gay and lesbian market. But print has its
drawbacks, too. Circulations are low, in large part due to fears
among gays and lesbians about what will be done with their names
after they have subscribed. And only two magazines can be
considered national: Out, with a paid circulation of 175,000, and
The Advocate, with a paid circ of 100,000.

"The real issue with this market is: Where will you get
something like Ebony with a circulation of 1.6 million?" says
Buford. "The Internet may just be the media that makes reaching the
gay community viable."

Lou Fabrizio, former publisher of Out, agrees. Gay.com lured him
away from the magazine to be its vice president of advertising. "I
did the math," Fabrizio said. "Everyone wants more numbers, and
this site is visited by 1.2 million individuals a month." That's
larger than the combined circulations of Out and The Advocate.

The research speaks volumes: Gay men and women were three times
more likely than the general population to be online in 1997,
according to Simmons Market Research; and a recent survey of gays
and lesbians from Greenfield Online shows that 65 percent of gay
and lesbian Internet users go online more than once a day. Once
there, 71 percent buy products or services.

Why financial services? Gay households have a median income of
$55,670, according to Simmons; 86 percent of gays and lesbians who
use the Internet have no children in their households, according to
Greenfield Online. About 70 percent of gays have at least a college
education, and work in professional or managerial jobs, and 89
percent say they are more likely to buy a product if its
advertising is targeted at them, according to Simmons.

And the time is right. "I don't think anyone can discount the
impact that the AIDS crisis had on marketing efforts to gays," says
Scott Matter, communications director at Mulryan/ Nash, an ad
agency specializing in the gay market. "Especially for companies
that are doing financial planning-selling mortgages and long-term
financial planning to this market didn't make sense." Now, with
mortality rates plummeting for people with AIDS-down 46.4 percent
in 1997 from the previous year, according to the U.S. Department of
Health and Human Services-financial service companies are at last
making the effort.

Data from Greenfield's study suggests that the Web is a
particularly good place for financial companies to reach
gays-especially those most likely to use their services:
35-to-44-year-olds.

Many are not being reached by other media: Almost 40 percent of
gays online say they don't have a local gay or lesbian newspaper,
70 percent say they don't read The Advocate, and 74 percent don't
read Out.

And almost 21 percent of gay 35-to-44-year-olds online
frequently visit financial sites; 24 percent frequently manage or
track finances, stocks, and bank accounts online; and 60 percent
think they're part of an unrecognized market that needs to be
tapped.

Some financial services companies have already recognized the
importance of the gay market. American Express Financial Advisors,
the leader in marketing financial services to gays, has offered
domestic-partner planning services since 1996. But the involvement
of its independently contracted financial advisors goes back
further. For years, the advisors have offered seminars in the gay
community, advertised locally, and sponsored gay pride events.
James Law, a financial advisor with Amex in New York City, says
that in 1993, the advisors approached corporate management with the
idea of making the gay market a national priority.

Management then spent a considerable amount of time and money on
its own market research, including hiring two people to oversee
market development. "We went out and talked directly to gay and
lesbians in focus groups," says Margaret Vergeyle, vice president
of emerging markets, of which the gay and lesbian market is part.
"What they told us was: 'I want to work with a company that
understands me and that I believe is serious about me and not just
making a quick buck. I want to know how this company treats its own
employees."

Census data isn't collected on sexual orientation, but estimates
from a variety of sources, including the Kinsey Report, place the
gay population between 6 percent and 15 percent of the total. (Most
marketers use a more conservative 5 percent to 7 percent, which
puts the numbers between 10 million and 14 million.)

While Amex runs television ads to build brand awareness, the
company buys print to reach niche markets. So in 1996, it tweaked
copy for gay readers, and began running ads in Out and The
Advocate. Last year, American Express Financial Advisors spent
$237,000 nationally in the gay press, according to Competitive
Media Reporting, less than 1 percent of its total ad
expenditures.

Vergeyle says the marketing efforts have definitely paid off,
but declined to release any numbers. As for the Internet, she says,
"We aren't quite there yet, but the gay market has such a high
incidence of being online that the company will be exploring
it."

Of course, gfn.com hopes to have staked its claim as the gay
financial Internet site by then. President Jeffrey Newman projects
100,000 registered users by the end of the year. But his site may
have to fight for market share with gay.com. After all, with a
million visitors per month, gay.com will be a serious contender as
soon as its financial partners are in place.

To date, none of Prime Access's financial clients have
advertised on either site. "We're kind of waiting to see who will
be the dominant gay force on the Internet," says Buford. Who's
going to be the Disney, the Ebony, the Univision? he asks. "That
remains to be seen."